Business

The Church on the financial meltdown: Usury and speculation are to blame

If there’s anyone in the mainstream media willing to listen to the Church these days (I doubt it), they’ll discover that centuries of Catholic teaching about the sinful practices of usury and financial speculation can explain why Wall Street is tumbling down. (For the best technical explanation, read The Trillion Dollar Meltdown:Easy Money, High Rollers, and the Great Credit Crash, by Charles Morris, a Catholic, and frequent contributor to Commonweal).

Put very simply, usury is lending money at punishingly high interest rates, and speculation is high-risk investing that is actually a form of gambling. It you go to the online Catholic Encyclopedia of 1913, you’ll find clear, informed, and balanced explanations of both terms (if only the media could be like this!), including examples of when high-interest lending and high-risk investment Can be justified.

But the verdict is clear. To those “subprime” lenders who justify themselves by saying that giving out mortgages at very high interest rates to people who were poor credit risks was about making the American Dream possible for the masses, the encyclopedia responds with warnings about temptation and sin: “Lending money at interest gives us the opportunity to exploit the passions or necessities of other men by compelling them to submit to ruinous conditions; men are robbed and left destitute under the pretext of charity. Such is the usury against which the Fathers of the Church have always protested.”

And about the real estate market mania that drove lenders to issue mortgages that were only viable if property values continued to skyrocket, (not to mention the deceptive slicing up of these mortgages into multiple, inscrutable parts, that no one understood, for re-sale in secondary markets around the globe), the encyclopedia has this to say: “…speculation tends to develop a passion which frequently leads to the ruin of a speculator and his family. The hope of becoming rich quickly and without the drudgery of labour distracts a man from pursuing the path of honest work. The speculator, even if he succeeds, produces nothing; he reaps the fruit of the toil of others, he is a parasite who lives by preying on the community.”

Unfortunately, as in every financial crisis during the past twenty years, the speculators who profited and the people who were ruined were usually not the same people. The “collateral damage” from these crises includes (among others) the employees of Bear Sterns, Lehman Brothers and whichever company falls next. (They join past victims from Drexel, Enron, Arthur Anderson, and more).

There are those who view the Church’s suspicions about usury and speculation as archaic remnants of pre-modern thinking. Judge John Noonan, the famous dissenter against the Church’s ban on birth control, wrote in his book A Church That Can and Cannot Change,, that the Church definitively reversed its position on usury. He’s wrong. As with other issues, such as religious liberty, Church teaching on usury is an example of a “development” of doctrine. (See John Henry Newman on this subject). As the social context changes, Church teaching evolves, becoming more nuanced, but never contradicting previous positions.

From the Catechism of the Catholic Church, to the social encyclicals issued by popes going back to Leo XIII in the nineteenth century, the Church continues to recognize usury and speculation as harmful forms of lending and investment (the Church is not alone—civil government still has laws against excessive interest rates and “ponzi” investment schemes. And Moslem businesses have to find ways to work around Islamic prohibitions against lending at interest). These concerns are part of the Church’s economic humanism, reflected in these statements from the Catechism [#2423 to 2426]:

“Any system in which social relationships are determined entirely by economic factors is contrary to the nature of the human person and his acts… A theory that makes profit the exclusive norm and ultimate end of economic activity is morally unacceptable. The disordered desire for money cannot but produce perverse effects. It is one of the causes of the many conflicts which disturb the social order… The development of economic activity and growth in production are meant to provide for the needs of human beings. Economic life is not meant solely to multiply goods produced and increase profit or power; it is ordered first of all to the service of persons, of the whole man, and of the entire human community. Economic activity, conducted according to its own proper methods, is to be exercised within the limits of the moral order, in keeping with social justice so as to correspond to God’s plan for man…”

I get the argument you make, I don’t disagree… entirely. Your argument, especially your title, seem to avoid demanding any personal accountability on the part of individual borrowers. I see this whole mess as a giant con-game perpetrated by immoral CEOs in concert with corrupt and immoral elected officials. Any good con-man knows that you can’t run the scam unless you have individuals who are willing to do something “wrong” in exchange for quick profits. I reject the notion that people were duped.

The larger crisis today is personal debt in relation to worth… Americans are broke because they spend more than they make and borrow to maintain lifestyles they can’t afford… don’t need IMHO. Insanely, the greatest asset we have—children—is purposely in short supply these days. So much self-inflicted pain!

Our culture has embraced materialism as a replacement for God in many ways, and that is the core problem. The current “crisis” is a symptom, not the disease. To blame “usury and speculation” is like blaming forks for fat people.

Chassup, yes, the current crisis is a symptom, you’re right. But it’s also a systemic problem, a structure of sin, as the catechism says, where the gov’t (and the culture) says that any financial act between consenting adults is okay. When people exploit each other sexually under the same principle of consent, we don’t hesitate to say that the sexual revolution, or bad sex education, made it possible. The Church recognizes that we’re culturally-conditioned creatures. We don’t act in a vacuum.

Angelo, by “systemic problem” I hope you are referring to the illness in our culture that results from turning away from God. I agree, as I stated before. If you mean that individual responsibility must be overlooked, then we are in disagreement.

There are really two discussions for Americans to have concerning the current financial “crisis,” or many other issues facing us.

1) Where are we, and how did we get to where we are today, in simple forensic terms—who, what, when, how? This demands honest objectivity, and is not happening.

2) How did it get to this- a consideration of competing philosophies being presented to the American people-“who are we, what is our purpose, our vision for the future, the path we choose from here.” This demands honesty and objectivity as well, but also demands self awareness, and that is in short supply these days.

Americans are shouting past each other not understanding what they are actually saying, repeating a slogan or campaign speech, motivated by emotion (fear)-not reason. That’s why Obama’s early speeches about hope were so popular, deep down, Americans want to go forward in light, not darkness. Unfortunately, he was just talking, he’s now deep in the business of selling fear and hate, barely a hopeful word these days, all doom and gloom.

Look for this crisis to be solved through measured, market-driven steps. Reject an irrational, fear-driven response looking to blame capitalism as the culprit. The culprit is corruption, fraud, deceit, greed, theft and lies by individuals not held accountable.

There’s also the communitarian issue here, and the principle of subsidiarity. In previous times mortgage loans were made mostly by local lenders who had a local reputation to support and local sources of info on the reliability of the borrower to repay.;But in recent years, since the massive deregulation of the industry, it has been mostly a business of large regional or national banks lending through local offices, often with little reliable information about the credit-worthiness of the borrower. Worse, these guys often didn’t really care about the “toxic loans” they were making, because it was the plan from the get-go to package this and other similarly dodgy loans to sell to yet another company, often owned overseas. Now a huge percentage of this nasty nation-wide debt is held by the Chinese and Japanese, who were buying it up with dollars they made by selling their goods to Americans. Surely, this was all nothing if not “market driven”...?

Notice the hunted/haunted look in the eyes of our so-called leaders of late? Their desperation flows from the understanding that truth and justice are standing just outside the door, and knocking hard. A sky-darkening flock of chickens (or locusts…) have come home to roost and our greedy and arrogant monetary and political leaders know that the end of their power is nigh !!!

Now’s the time to hold their feet to the fire and take back our civilization from these evil scoundrels. Karma’s a bitch and those “atop the pyramid” are just beginning to taste Her great displeasure at the greed and great injustices that the world’s economic and financial systems have long caused and perpetuated.

Anyone who still thinks that money and imposed usury (credit, speculation, etc.) are a wise and just way to manage civilization is suffering from strong delusion and Stockholm syndrome.

Humanity has long been duped into accepting the great deceptions of money and banking. The world financial system is now in the process of a slow and inexorable implosion and the unraveling and death throes will make Enron look like child’s play. The mess created in recent decades and greatly magnified by the Neo-cons and their greedy cohorts is about to plunge the world into a great debacle.

It will soon become obvious, to even the most clueless, that it will be easier to step away from the deceptions of the past and finally fix our civilization so it works for everyone, not just for a self-chosen few. Why should humanity struggle and suffer any longer to repay debts and endure debacles created by amazingly greedy and deceptive monetary and political leaders?

Ever heard the term Jubilee? The power of the rich and arrogant is about to be blown away on the winds of irresistible change.